Folikwe: Government Should Review Policies on Manufacturing

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Managing Director/Chief Executive Officer of Berger Paints Nigeria Plc, Mr. Peter Folikwe spoke to journalists about challenges facing manufacturing companies, survival strategy of the company among others issues. Goddy Egene presents the excerpt:

As an operator, what would you regard as the major problems affecting manufacturers in Nigeria?

The Purchasing Managers Index (PMI) recently shows that some sectors of the economy had recovered from the recession. Recall that Nigeria ran into recession in 2016 and by now, only the agricultural sector and one other sector but certainly not manufacturing has recovered from the recession. There is no gainsaying that the manufacturing sector is the major employer of labour in the country.

I praise investors in this sector for their selfless service to humanity. Unfortunately, government seems to be a bit insensitive to their plights. Government promise for forex availability to manufacturers has not been fulfilled as most depend on importation of raw materials. The official CBN forex rate of N305/$ has remained an illusion. Since 2015 up until now, Berger Paints has never bought dollar at N305 for its letters of credit (LC) transactions. I don’t really see it happening for now. Even when you bid through the forex windows, it will take the grace of God to be allocated in a bid. This invariably affects our operations as local suppliers who buy forex at the parallel market, offer the raw material at premium, yet cannot pass the excess cost to the customer.

What would you advise the government on how to create the much-needed enabling environment for the manufacturing sector?
My advice to government is to do a rethink of its policies as they affect the manufacturing sector. This is the sector that would actually grow the economy if the potential within are properly harnessed. The government must have clear understanding that it is not the portfolio investors that grows an economy because the government keep saying, “we are trying to encourage investors that grow economies.” It is the government’s ability to create enabling environment that can make companies to operate optimally, make profits and ultimately become attractive to both indigenous and foreign investors.

The Ghanaian government made a deliberate decision to grow its manufacturing sector in regions by deliberately enacting policies that will achieve that purpose. Nigeria needs to take a cue from them. Government can give land free and grant tax holiday among others in order to encourage investors. The second thing which I think the government should address as a matter of urgency is to evolve a policy that would help create a value chain for crude oil instead of exporting only in its primary state to the developed world who then process and sell back to us as raw materials/petrochemicals. The question is what stops Nigeria from getting there? Even the refining of petrol, diesel has been subjugated for importation. It doesn’t make sense. Thank God for the likes of Alhaji Aliko Dangote that is coming up with building a private refinery.

These are some of the things that government should encourage rather than just selling our solid minerals, in crude state.
Government should create an environment where people can actually be engaged as part of the process of translating raw materials to finished products. Yes, it requires a lot investment and knowledge in science and technology, but I tell you we have Nigerian locally and in the Diaspora making great strides in science and technology. All they need is the enabling environment. Nigeria is blessed with abundant human and material resources that can drive the whole processes, given the government’s unfettered support. We need to act fast if Nigeria should keep pace with the global development in economic transformation.

In view of the challenges facing manufacturers in Nigeria, is Berger Paints considering capital injection by leveraging on the opportunities in the capital market?
For Berger Paints, we are careful about how we source for fund to do business. The cheapest fund is obviously through the capital market. We were the first paints company to be quoted on the Nigerian Stock Exchange(NSE). It shows that we understand the nitty-gritty of the market and quickly took the advantage of the opportunities then. But, it’s increasingly becoming difficult nowadays to get these cheap funds. Investors are more than ever cautiously looking at the market indicators that will encourage them to invest in a company.

Considering all the challenges facing the manufacturing sector, many high net worth investors are apprehensive of putting their money where returns will not come quickly in view of the state of economy. As for Berger Paints, we efficiently manage our working capital to ensure that we minimise our exposure or avoid borrowing as much as possible, except for our capital projects. We, however, recently took some money from the Bank of Industry (BOI) for purpose of completing our new factory project currently at completion stage. This is a project that will transform our operations and reinforce our position as an industry leader. We are mindful of the inherent dangers of borrowing.

You don’t take short term borrowing for long term projects. It will be a mismatch. We are capital market friendly and the shareholders are always ready to support our initiatives. Having existed for over 58 years, our pedigree and brand positioning are very solid. If you take a critical look at Oba Akran, Ikeja today, only few companies that started at about our time then are still existing till today. Our pedigree shows that investors will have confidence in our stocks.

Looking at the factors that drive a company’s share price, what efforts is Berger Paints making to attract more patronage to its shares on the Nigerian Stock Exchange ?
We have put in place a number of marketing initiatives that will soon start yielding positive results. It will also create more visibility for our brand. Marketing is not just about advertising. There are other legs of marketing such as public relations, media management, and investor relation etc. We are also working round the clock to make our products visible in the market place. Our products are on high demand because of its superior quality and competitive pricing. We really need to make our products available within the reach of our teeming consumers. Berger Paints is a strong brand and we need to ensure that those who represent us at every level of the value chain propagate our brand culture and values. If the reputation of a brand is tainted, it stands the high risk of negative market response, and every business must manage this.

Our focus therefore is on the topline and bottom-line figures without taken our eyes off excellent customer service for repeat purchase. At Berger Paints, we have always come up with innovative marketing ideas, new products development and ensuring the we continuously improve on our quality standards. For instance, Berger Colour World has been one of our flagships in the past. We have deployed POS machines (for customising paint colour with JIT delivery) and majority of our colour world stores in the trade. We are deploying that to a very large extent to get the market closer to us or get us closer to the market. Equally, our colour charts where you have all the colours schemes are readily available to specifiers – painters, architect, quantity surveyors and builders who now have access to our colour charts as at when due.

Part of what we are also doing is to make sure that we create visibility about our outlets. For instance, we are installing “the directional signs” along major roads where our stores are located for better visibility and identification of our colour Worlds. These are some of the initiatives in collaborating with our partners to achieve the overall corporate objectives. We value our business partners as they represent us in the trade. We are educating our team in the area of Customer Relationship Management (CRM) so that customer chain is unbroken.

Some of your competitors have a policy of annual colour thatpeople look out for every year. Are you thinking along that line?
We don’t do colour of the year at Berger Paints as we believe that customer preferences keep changing by the day. We only observe colour of the month. This promotes an array of colours annually. For instance, our colour for this month is lemon–yellow. If you are observant you will notice this at the entrance gate! It is also visible on all our online platforms – website, facebook etc.

What is the philosophy behind the recent introduction of your POS machines?

It is a simple philosophy. This is about demand and supply, and we have come to some understanding that Nigerians are well travelled. They see what is happening in other climes, especially in our business segment. Nigerians love quality with high standards. The POS machines offer the customer the liberty to customise their colour choices in whatever quantity they want it and the delivery process is a lot quicker. These decision makers have limited time and there is a need to take the product close to them. That is the objective of the POS machine. For instance, the POS machine addresses the issue of batch production in a pragmatic way.

It is a changing trend and as a dynamic organisation, we are equally living up to the consumer demand trend. In the past, people don’t really play with colours. Today colours have their personalities and people now express themselves in colours. People are limited by the colours the paint maker makes available in the market. But when you want those customised colours, you can have them too in the outlet in whatever quantity you want. We can even dispense as low as one litre, four litres, and 20 litres in a simple production process. We would be the first Nigerian company to offer such customized colours in volume of twenty litres per production process.

Considering the fact that people tend to see Berger Paint’s products as meant for the rich only, is there any strategy being put in place to segment your products without compromising standards?
Fundamentally, every one of us understands that there is no way a company can address every market segment. You obviously have to set your goals around your target market. You can’t target everybody. You need to profile your customers and cascade them into segment. People, however, migrate from one segment to another, depending on the shift in their economic status at any point in time. The segment we focus on is the medium to the upper class of the economic strata. We are not saying that we are beyond the reach of the lower economic groupings. We expect people to improve in their economic status.

Obviously, our products are aspirational brands! Everybody out there is interested in our products because of the top-class quality. Be that as it may, the way people look at price and value differs. We believe that if you buy value, over time the economics of paying for premium ab-initio pays-off into the future because of durability/quality.

There is a saying that “cheap is expensive.” A lot of people don’t understand what that means. For instance, you buy product today for N100, meanwhile, there is an alternative for N30. If you buy the N100 brand, it will last you for 10 years. Conversely, if you buy the N30 brand, it will only last you for two years. If you do your proper arithmetic, the N100 brand is less expensive in the long run, aside saving time and inconvenience on the replacement of the less durable product.

Therefore, on the face value, the N100 may look initially expensive, but from the perspective of intrinsic value, you actually get more value than the cheaper alternative. That is what makes cheap expensive. Note, however, that we have our budget brands for aspirational customers at the lower consumer segment.

Government is the biggest spender in the economy and there was a time that government was criticised for not patronising made in Nigeria products. What is the current trend?

The trend has not totally changed although the government keeps talking about it. I was privileged to be at a forum of CEO’s with Lagos State’s Governor AkinwunmiAmbode recently and I raised this pertinent issue. I told him that I have taken time to review some of his projects where decorative paints were applied. Virtually all the project paints used have faded within a short period of time. Suffice to note that Berger Paints also quoted for these projects but for whatever reasons, these projects were awarded then to unbranded paint companies.

I explained that one of the ways by which government can encourage indigenous companies who fulfil their statutory obligations like Berger Paints is to patronise their products. So long as our products meet with the specifications and standard, we ought to be given preference. This is one way to protect the indigenous companies rather than sacrifice them on the altar of penchant for foreign products that are of less value at times. In fairness to Governor Ambode, he has put in place some processes to address this concerns in Lagos State. I hope other governors and indeed the federal government with its mass housing scheme will take a cue.

To what extent is the influx of fake products affecting Berger Paint Plc’s bottom line?
Most top-rated brands often face the heinous challenge of pass-offs on their brand or outright faking of their product brands. Berger Paints is not an exception. We apprehended some of the criminals recently and handed then over to the Police for persecution. On our part, we are doing all we can to direct the unsuspecting customer to our selling points – our online-or from our business partners represented in major capital cities in Nigeria. We can also be reached on Twitter, Facebook, Instagram and the likes.

The Lagos State government is assisting us in our efforts to apprehend those who are de-marketing us through fake products. When people fake your products, not only are they destroying your brand reputation, they are also taking food off your table. Why do they fake our products? This is unacceptable. We don’t have data to validate the details of the impact of fakers, but we know it impacts our top and bottomline numbers. Just like we have zero tolerance for fraud in our business, we have zero tolerance for fakers. Whether it is internal or external, we have that same attitude towards those who indulge in fake products. We actually go after them. We get law enforcement agents involved to ensure that they are prosecuted. As we speak now, some of them are in Kirikiri prison.

Last year, Berger Paints went through a brief period of industrial dispute with its workers. What is the current situation?
I will say that the situation is like the Yoruba man will say that “the nose is very far from the head.” The situation has been turned around. It was well managed. What management did with the support of the board was to listen to feedback from the staff because these are issues that dated back so many years. It is just the issues crystallised a few months ago. There is nowhere in the world that disputes are settled when opponents are at war. They are ultimately settled on a round table discussion and that was basically what we did. We listened to each other understood each other’s grievances and sorted out everything. In a home, husband and wife may disagree but they settle afterwards.

The way we settled showed how pragmatic we are as an organisation that is ready to listen to all stakeholders. We just hope that the government will one day listen to us like we listened to our staff. I can confirm that relationship between the management and the unionised labour is cordial. They are very committed to their duties. Without being immodest, I can say that Berger Paints has one of the best brains in the chemical and allied paints business. In terms of technical and production processes, we pride ourselves as adding value to the lives of our employees by training and retraining them. In fact, we encourage personal development, so that every staff can add value to his or her own life. We take issue of staff welfare and morale very seriously.

What is your vision for the company in the next five years?
When I was coming to assume duty as the CEO in this company, my decision was to leave Berger Paints someday better that I met it. I will say we are not fully there yet, but a number of initiatives we have executed are aimed at achieving this singular objective. One of the objectives we aim to achieve is to change the route to market dynamics because if you don’t get your route right, your topline will be threatened. As mentioned earlier we are completing our new factory which will offer innovative products of international quality standards. This will no doubt enhance our leadership role in the paints business in Nigeria. Our leadership is not only in terms of numbers but also in product quality, customer service delivery and a host of other performance metrics.

What is your advice to the shareholders?
For the existing shareholders know our track record that we pay dividends annually without fail, irrespective of the challenges in the economy. We paid dividend at the height of recession of 2016. As for potential shareholders, they should do their analysis. I am confident that they will appreciate the leadership of a company, its investment in modern equipment and human capital development as keys to growth and profitability. Efficient and effective leadership, as you know, is hinged on integrity. I am not here to blow our trumpet, but I can say in Nigeria today, Berger Paints can pride itself as one company that operates within the confines of corporate governance. Therefore, when an shareholder invest in our stock, the investment it is safe and rewards are assured.